Lawmaker Challenges NCAA on Tax Exemption

U.S. Rep. Bill Thomas (R-Bakersfield) is questioning whether the NCAA, with its $521.1-million annual budget and lucrative television rights package, deserves its tax-exempt status.

In a pointed, eight-page letter sent Monday to NCAA President Myles Brand, Thomas suggested that big-time athletic programs might be at odds with the purpose of higher education and might not qualify for tax-exempt status.

Thomas, the chairman of the House Ways and Means Committee, said in his letter that educational institutions deserve tax-exempt status. But the lawmaker described the need for a college athletics exemption as “less apparent, particularly in the context of major college football and basketball programs.”

Thomas, who reviewed nonprofit hospitals and credit unions, said the nonprofit sector must be scrutinized because it is growing “in size, scope and economic impact.”

But the letter drew a strong reaction from the NCAA in Indianapolis.

“The NCAA disagrees with the fundamental assertion that intercollegiate athletics is not part of higher education,” said NCAA spokesman Erik Christianson. “We also challenge the underlying assertion that not-for-profit status is linked to the amount of revenue an organization may generate.

“Instead, the correct view, as supported by previous IRS rulings, is to examine how not-for-profit organizations utilize generated revenue for the common good.”

Trent Stamp, executive director of Charity Navigator, an online database that rates charitable organizations, said that the NCAA’s status would comply with existing tax law if its administrative costs are appropriate and the television rights money “is doled back out to their member institutions.”

“That seems to be consistent with the rules for tax-exempt organizations,” Stamp said.

It’s uncertain whether any attempt to strip the NCAA of its tax-exempt status would gain traction in Washington.

This year, Gary Roberts, director of the Tulane University Sports Law program and the school’s NCAA representative, described the political power of college sports as “unbelievable” and football and basketball as “a religion” among many fans.

greg.johnson@latimes.com